Are You Maximizing Your Tax Savings?
RRSPs can give the average Canadian a huge financial advantage. The money you contribute to your RRSP is tax deductible. So in addition to putting away funds for your future, you can gain the immediate benefit of reducing the taxes you pay this year.
If you are considering an additional contribution, the last day that you can contribute to your RRSP and have it included in the 2018 tax year is March 1st, 2019. Keep in mind that you’ll receive a separate contribution receipt for any contributions you’ve made between January 1st and March 1st, 2019.
Contribution limits
Contributing to your RRSP is a great retirement savings strategy. It is also a great tactic for reducing your taxes, but remember that the government does impose limits to the amount you can contribute to your RRSP.
To qualify for RRSP deductions, you first have to have earned employment income and have filed your taxes. The maximum you can save into an RRSP every year is 18% of your pre-tax earned income from the previous year. There are conditions to this. For example, there is a ceiling that gets bumped up a bit every year, and there are carry forward rules.
Carry forward rules
If you haven’t maximized your RRSP contributions each year, the ceiling for your contribution limits is different than the annual contribution limit. Note: Be sure to consult a professional, like your financial advisor, or accountant to get the specific details.
Start by looking for your unused, carried forward contribution room. You can find it in the notice of assessment from last year’s taxes. This is a document that Canada Revenue Agency will have sent you after they assessed your tax return. The unused contribution room could represent significant tax refund for this year’s taxes.
Remember, be sure to consult a professional, such as your financial advisor, or accountant to get the specific details.
